Shares in Halfords (HFD) plunged more than a tenth on news that full-year profits had been dampened by sterling’s depreciation against the dollar. The gross margin fell from 51 per cent to 50.2 per cent, while the higher cost of imported goods conspired to knock underlying pre-tax profits by 6 per cent to £71.6m. This bad news came despite a mark-up in revenues, buoyed by a like-for-like rise in retail motoring and cycling sales of 1.9 and 2.9 per cent, respectively.
The market reaction was presumably exacerbated by a less-than-uplifting outlook statement from management. While the motoring market is expected to remain “robust” and there are good growth prospects for cycling, Halfords leadership doesn’t expect to raise prices in cycling again this year. Along with actions taken to offset the impact of currency movements, and the plan to accelerate services investment, underlying pre-tax profit is now expected to stay flat in FY2019.
On this somewhat sour note, we learned that Halfords has landed Keith Williams to replace Dennis Millard as non-executive chairman in July. Mr Williams, no stranger to competitive pricing in his past life as chief executive and executive chairman of British Airways, must also divide his time between boardroom roles at Aviva, John Lewis and Royal Mail.
On average, analysts are forecasting adjusted EPS of 31p for the year to March 2019 (flat on FY2018).
| HALFORDS (HFD) | ||||
| ORD PRICE: | 346p | MARKET VALUE: | £688m | |
| TOUCH: | 344-346p | 12-MONTH HIGH: | 391p | LOW: 305p |
| DIVIDEND YIELD: | 5.2% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 212p* | NET DEBT: | 21% | |
| Year to 30 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 0.94 | 72.6 | 28.6 | 14.3 |
| 2015 | 1.03 | 83.8 | 33.8 | 16.5 |
| 2016 | 1.02 | 79.8 | 32.5 | 17.0 |
| 2017 | 1.10 | 71.4 | 28.7 | 17.5 |
| 2018 | 1.14 | 67.1 | 27.8 | 18.0 |
| % change | +4 | -6 | -3 | +3 |
| Ex-div: | 26 Jul | |||
| Payment: | 31 Aug | |||
| *Includes intangible assets of £394m, or 198p a share | ||||
